How to complain to AFCA about a business insurance claim decision

If your insurer or broker declines or reduces a business insurance claim, first make a complaint through its internal dispute resolution (IDR) process; under ASIC's rules it generally must give a final written response within 30 calendar days for standard complaints. If you are unhappy with the response, or you hear nothing within the time limit, a small business (generally one with fewer than 100 employees) can lodge a complaint with the Australian Financial Complaints Authority (AFCA). AFCA is free for complainants and independent of the insurer. You generally need to lodge within two years of the insurer's final IDR response, and AFCA also applies an overall time limit linked to when you became aware of the loss.

This guide is part of the liability claim mistakes overview. If the dispute is about wording, the guides on common liability exclusions and claims-made notification explain the clauses insurers most often rely on.

Step 1: get the decision in writing

Ask the insurer for:

• the decision and the reasons;
• the policy clauses it relies on;
• the facts and documents it relied on, such as an assessor's or investigator's report;
• information about its complaints process.

Since 1 January 2022 handling and settling claims has been a financial service, so insurers and claims handlers must act efficiently, honestly and fairly. If an insurer relies on non-disclosure, it should be able to show what it would have done had it known.

Step 2: make an internal complaint

Write to the insurer's complaints team (not just the claims officer). Include:

1. your policy number and claim number;
2. what you want, such as acceptance of the claim, a higher payment, or a review;
3. why you disagree, referring to the wording and the facts;
4. supporting documents: photos, invoices, contracts, emails, expert reports.

Under ASIC Regulatory Guide 271, the insurer must acknowledge the complaint promptly and give a final response within 30 calendar days for standard complaints, unless an exception applies. If it cannot meet the deadline, it must tell you why and that you can go to AFCA.

If a broker arranged the policy, it can help prepare the complaint. If your complaint is about the broker itself, use the broker's IDR process.

Step 3: check AFCA eligibility

AFCA deals with your dispute with your insurer or broker about cover and claim handling. It does not decide the third party's claim against your business; that remains a matter between the parties and, if needed, the courts.

Step 4: lodge with AFCA

You can lodge online or by phone. AFCA will usually:

1. register the complaint and refer it back to the insurer for a final chance to resolve it, if the IDR process has not finished;
2. try to resolve it by negotiation or conciliation;
3. if it remains unresolved, have a case manager or ombudsman assess it and issue a preliminary view or a determination.

AFCA decides what is fair in all the circumstances, having regard to the law, industry codes, good industry practice and previous decisions. A determination is binding on the insurer if you accept it; if you do not accept it, you can still go to court.

What strengthens a complaint

• A clear timeline of what happened and when you notified the insurer.
• Evidence of what you disclosed at the start and at renewal, such as proposal forms and emails to your broker.
• Expert evidence if the dispute is about cause, for example whether faulty work or another factor caused the damage.
• The exact wording of the clause, and why your reading is reasonable.
• Calm, factual language.

Worked example: a reduced claim

An illustrative bakery's claim for a customer's injury is reduced by 40% because the insurer says the bakery failed to disclose that it had started catering events. The bakery:

1. asks for the insurer's underwriting evidence and finds it relies on a rating guide that applies a 15% loading for catering, not 40%;
2. lodges an IDR complaint with that point, showing that a 15% loading on an $1,800 premium would have made it $2,070, so the proportion is $1,800 / $2,070 = 87%, not 60%;
3. receives a final response increasing the payment to 87% of the claim.

If the insurer had refused, the bakery could have taken the same argument to AFCA.

When to see a lawyer

• The amount is above AFCA's limits or your business is not a small business.
• A third party has started court proceedings against you and the insurer has refused to defend.
• There is an allegation of fraud.
• Limitation periods are close.

Legal aid is generally not available for business disputes, but some community legal centres and small business commissioners can help with information.

Frequently asked questions

Does it cost anything to go to AFCA?

No. AFCA is funded by its members; complainants do not pay a fee.

Can I go to AFCA while my claim is still being assessed?

You can complain about delay or how the claim is being handled. The insurer will usually be given a chance to respond first.

Is the General Insurance Code of Practice relevant?

The Insurance Council of Australia's Code sets standards for many policies, including timeframes for claims, and AFCA takes industry codes into account. Check whether your policy is covered by the Code.

Can AFCA order the insurer to pay?

If you accept a determination in your favour, it binds the insurer, which can include paying the claim or compensation within AFCA's limits.

Sources

• AFCA — eligibility, time limits, monetary limits and how to lodge
• ASIC — Regulatory Guide 271 on internal dispute resolution
• Insurance Council of Australia — General Insurance Code of Practice
• Australian Small Business and Family Enterprise Ombudsman — support for small business disputes